Johnson et al v. GEICO Casualty Company et al
MEMORANDUM OPINION regarding MOTION for Summary Judgment (D.I. 579 ). Signed by Judge Richard G. Andrews on 6/16/2014. (nms)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
KERRY JOHNSON, and SHARON
ANDERSON, on behalf of themselves and
all others similarly situated
Civil Action No. 06-408-RGA
INSURANCE COMPANY, et al,
Richard H. Cross, Jr., Esq. (argued) and Christopher P. Simon, Esq., Cross and Simon LLC,
Wilmington, DE, attorneys for the Plaintiff.
Paul A. Bradley, Esq., Maron Marvel Bradley & Anderson, LLC, Wilmington, DE; George M.
Church, Esq. (argued), Miles & Stockbridge P.C., Baltimore, MD; Meloney Perry, Esq. (argued),
Perry Law P.C., Dallas, TX, attorneys for the Defendants.
This is a continuation of the Court's Memorandum Opinion dated March 26, 2014. (D.I.
655). This matter has been fully briefed. (D.I. 585, 599, 611, 662). The Court heard oral
argument on May 8, 2014. (D.1. 663). For the reasons set forth herein, the Defendants' Motion
for Summary Judgment is GRANTED IN PART and DENIED IN PART.
Count II - Breach of Contract
To prove a breach of contract claim, the Plaintiff must establish: (1) the existence of a
contract, (2) a breach of the contract, (3) and that the breach of the contract was the proximate
cause of damages. VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).
The Court assumes without deciding that there is binding contract between the parties
and that there was a breach of said contract. Thus, the Court turns its attention to whether the
breach of the contract was the proximate cause of the claimed damages.
GEICO argues that, "There is no legally sufficient evidence to establish a causal
relationship between the auto accident and [the] treatment rendered between June 13, 2005 and
October 27, 2005." (D.I. 585 at 38). GEICO maintains that for the Plaintiff to establish that
GEICO breached its contract for nonpayment for a rendered treatment, the Plaintiff "must
present legally sufficient evidence to establish a causal relationship between the accident and this
treatment." Id. GEICO further presents the Court with evidence that, while at the time of the
PIP claim there was no reason to question causation, discovery in this case has raised the issue of
causation. Specifically, discovery has shown that the Plaintiff has suffered longstanding chronic
back and neck problems, the same injury of which the Plaintiff now complains. Id. GEICO
also presents deposition testimony showing that Dr. Jones, the Plaintiffs doctor, "admitted that
he could not state to a reasonable degree of medical certainty or probability that the treatment at
issue was causally related." Id. (citing D.I. 654-3 at 9 (Dr. Jones stating, "All I know is [that]
she came in and told me the pain was related to the accident.")). Furthermore, GEICO
maintains that under Delaware law, proof of medical causation requires expert testimony, and no
such testimony has been proffered here. (D.I. 585 at 39 (citing Habel v. Temple University
Hospital, 2005 WL 637918 (D. Del. March 10, 2005)).
The Plaintiff argues that "to the extent that GEICO now attacks payment of Anderson's
medical bills as not prescribed or necessary, GEICO has waived such challenge by not raising it
within the mandatory 30-day period. Even if GEICO were allowed to concoct a post-facto
reason why coverage was not warranted, [Ms.] Anderson has established through the testimony
and report of her treating physician that her treatment was reimbursable under her policy." (D.I.
599 at 41 (internal citations and footnotes omitted)). The Plaintiff further maintains that any
preexisting disease or infirmity that she may have suffered is covered by Delaware's
longstanding eggshell skull rule. Id. (citing Reese v. Home Budget Center, 619 A.2d 907, 910
n.1 (Del. 1992)).
The determination of proximate cause of an injury, especially as related to an automobile
accident, is not a matter of common knowledge and thus expert medical testimony is required.
Sluss v. Davis, 2006 WL 2846387 at *2 (Del. Super. Oct. 4, 2006); See also Rayfield v. Power,
840 A.2d 642 (Del. 2003). Here, GEICO has proffered sufficient evidence to demonstrate that
the Plaintiffs back and neck problems preexisted the car accident. This showing shifts the
burden to the Plaintiff to demonstrate that there is a genuine dispute of material fact as to
whether her injuries were caused by the car accident, and thus that her claims were reasonable
Ms. Anderson has put forth no evidence to establish that the treatment rendered to her
was causally connected to the automobile accident. There is nothing in the record, as presented
to the Court now, other than argument, to show that the Plaintiffs treatment was a reasonable
and necessary medical expense that arose from injuries sustained in the automobile accident.
Furthermore, once GEICO put forth evidence showing that the Plaintiffs injuries were unrelated
to the car accident, it became the Plaintiffs burden to bring forth medical expert testimony to
prove causation. Despite the years that this case has been before the Court, the Plaintiff has
failed to put forth such evidence. Therefore, GEICO's motion for summary judgment on the
Plaintiffs breach of contract count is granted.
The Plaintiff maintains that GEICO has waived any challenge to the reasonableness of
the medical charges because the challenge was not disclosed within the statutory 30-day period.
(D.I. 599 at 41 ).
When an insurer receives a written request for payment of a claim for benefits
pursuant to§ 2118(a)(2) of this title, the insurer shall promptly process the claim
and shall, no later than 30 days following the insurer's receipt of said written request
for first-party insurance benefits and documentation that the treatment or expense
is compensable pursuant to§ 2118(a) of this title, make payment of the amount of
claimed benefits that are due to the claimant or, if said claim is wholly or partly
denied, provide the claimant with a written explanation of the reasons for such
21 Del. C. § 2118B(b ). The aforementioned section precludes an insurance carrier from
changing the reason for a denial of an insurance claim after the 30 day statutory period. Spine
Care Delaware, LLC v. State Farm Mut. Auto. Ins. Co., 2007 WL 495899 at* 2 (Del. Super.
Feb. 5, 2007). In Spine Care the Court determined that the defendant was precluded from
asserting defenses not disclosed in the first 30 days and for changing its reason for denial. Id.
Specifically, the Defendant initially denied the claim on the basis that the medical facility fee
was not reimbursable as the medical facility lacked a proper license. Id. at * 1. The Defendant
abandoned this contention during litigation and argued that the facility fee was not reimbursable
because the facility fee was not reasonable or necessary. Id. The Court determined that the
Defendant was precluded under 21 Del. C. § 2118B(b) from raising this new defense, because it
was not disclosed during the 30 day statutory period. Id. at *3. Here, GEICO's initial denial of
the Plaintiffs claim was based on the reasonableness of the charge. This is the same defense
that GEICO now presents to the Court, though with notably more evidence. Therefore, the
Court finds that GEICO's coverage defense is not precluded under 21 Del. C. § 2118B(b). 1
The Plaintiff additionally argues that Ms. Anderson's pre-existing condition is irrelevant
because of Delaware's eggshell plaintiff rule. (DJ. 599 at 411 n. 27). While Delaware does
have a longstanding eggshell plaintiff rule, see Reese, 619 A2d at 910 n.1, the rule does not
excuse the Plaintiff from having to present evidence that the Plaintiffs damages were
proximately caused by the accident.
Count III - Bad Faith Breach of Contract
The eligibility to receive PIP benefits in an automobile accident is "entirely statutory in
origin and operation." Harper v. State Farm Mut. Auto. Ins. Co., 703 A.2d 136, 140 (Del.
1997). This is because the eligibility to receive PIP benefits derives from the Delaware No-
In connection with the class action certification in this case, Judge Farnan appeared to reach the same conclusion.
"Even if the claims [of the classes] were systematically denied and reduced, ... individualized inquiries would be
required to determine whether each class member's individual claim was actually medically necessary and their
expenses reasonable." Johnson v. GEICO Cas. Co., 673 F.Supp. 2d 255, 273 (D. Del. 2009).
Fault Insurance Statute rather than common law. Id. The Delaware Supreme Court has found
that the statute only creates a cause of action if there is a breach of the PIP contract. Id.
Furthermore, under Delaware law, a "cause of action for bad faith delay, or nonpayment, of an
insured's claim in a first-party insured-insurer relationship is ... a breach of contractual
obligations." D'Orazio v. Hartford Ins. Co., 2011 WL 1756004 (E.D. Pa. May 6, 2011), ajfd,
459 F. App'x 203 (3d Cir. 2012) (citing Tackett v. State Farm Fire and Cas. Ins. Co., 653 A.2d
254, 264 (Del. 1995)).
As a bad faith breach of contract claim is considered to be a contract claim and not a tort
claim, see Tackett, 653 A.2d at 264, and as the Court has found that there is no breach of
contract, there can, as a matter of law, be no bad faith breach of contract. Therefore,
Defendants' motion for summary judgment on Plaintiffs bad faith breach of contract claim is
The Plaintiff maintains that "GEICO's position that a bad faith claim cannot exist without
an underlying breach of an express term of the contract is an incorrect statement of law.... "
(D.I. 599 at 41, 42). To support this claim Plaintiff cites several cases for the proposition that
the "implied covenant of good faith and fair dealing is triggered when the defendant's conduct
does not violate the express terms of the agreement but nevertheless deprives the plaintiff of the
fruits of the bargain." (D.I. 599 at 42 (internal citations omitted)). The Plaintiffs arguments,
however, about good faith and fair dealing are not relevant here. The determination of the
existence of bad faith cannot supply causation in a case in which causation is unproved. The
breach of the covenant of good faith and fair dealing concerns breach, not causation. More
simply put, a breach of the implied covenant of good faith and fair dealing involves cases in
which there is a breach of a term that has been implied into the contract. Dunlap v. State Farm
Fire & Cas. Co., 878 A.2d 434, 441 (Del. 2005).
Count IV -Breach of Duty of Good Faith and Fair Dealing
The implied covenant of good faith and fair dealing attaches to every contract. Dunlap,
878 A.2d at 441-42. "[T]he implied covenant requires a party in a contractual relationship to
refrain from arbitrary or unreasonable conduct which has the effect of preventing the other party
to the contract from receiving the fruits of the bargain." Id. at 442 (internal quotation marks
omitted). A party is liable for breaching the implied covenant of good faith and fair dealing
when the party's conduct is such that it frustrates the general purpose of the contract "by taking
advantage of [its] position to control implementation of the [contract's] terms." Id. While
there exists an occasional need to imply contract terms that "ensure the parties' reasonable
expectations are fulfilled," quasi-reformation "should be a rare and fact intensive exercise,
governed solely by issues of compelling fairness." Id. (internal quotation marks and brackets
omitted). As for insurance contacts, the duty of good faith and fair dealing "comprehends duties
other than the duty to promptly process and pay claims." Id. at 444.
GEICO argues that a bad faith breach of contract and breach of the covenant of good
faith and fair dealing "are one and the same .... " (D.I. 585 at 34). However, the Delaware
Supreme Court has made it clear that the two claims are not the same, and furthermore that the
duty of good faith and fair dealing extends beyond the refusal to pay insurance proceeds. See
Dunlap, 878 A.2d at 442-44. GEICO also argues that the Plaintiffs breach of the implied
covenant of good faith and fair dealing improperly incorporates 18 Del. C. § 2304, as 18 Del. C.
§ 2304 provides the Commissioner the power to regulate the insurance industry, but does not
create a private right of action. (DJ. 585 at 28, 31 ).
The Plaintiff argues that, "GEICO has frustrated the overarching purpose of the insurance
contacts - and PIP law - and has taken advantage of its position to control processing of claims,
to its benefit, to the detriment of policyholders, and with fraud, deceit, misrepresentation, or
furtive design, in violation of the covenant." (D.I. 599 at 43). However, except for the
aforementioned generic statement, the Plaintiff does not cite to a single location in the record that
would demonstrate any such violation. In response to the GEICO's § 2304 argument, the
Plaintiff states that she is not relying on §2304 to create her claim, but instead solely to satisfy an
element of her claim. (D.I. 599 at 34, 35). 2
"The Delaware Unfair Trade Practices Act ('UTPA'), 18 Del. C. § 2301, et seq. (1975),
empowers the Delaware Commissioner of Insurance ... to deal with unfair trade practices within
the insurance industry." Correa v. Pennsylvania Mfrs. Ass'n Ins. Co., 618 F. Supp. 915, 925 (D.
Del. 1985). The UTP A does not create a private right of action. Davidson v. Travelers Home
& Marine Ins. Co., 2011 WL 7063521 (Del. Super. Dec. 30, 2011). However, the statute does
not preempt any common law right of action. Correa, 618 F. Supp. at 924. Finally, violations
of statutory requirements may be used to prove an element of a claim. See, e.g., New Haverford
P'ship v. Stroot, 772 A.2d 792, 797-98 (Del. 2001).
Here the Plaintiff is not using the § 2304 to satisfy an element of a claim, but is instead
arguing that the statutory requirements should be read into the contract that the insured and the
insurer agreed to. In other words, the Plaintiff is attempting to reform the contract via the
The Plaintiff raises this argument in terms of both Counts III and Count IV. The Court takes up the issue only as
it relates to Count IV, the breach of the implied covenant of good faith, as it is unnecessary to decide it in relation to
implied covenant of good faith and fair dealing, to include the requirements of 18 Del. C. § 2304.
For the Court to read into the insurance contract the requirements of§ 2304 would require the
Court to find that the parties would have agreed to such a term had the parties thought to have
negotiated with respect to the matter. See Dunlap, 878 A.2d at 442. Here, as § 2304 contains
no private right of action, the Court will not read the requirements into the contract3 without
compelling evidence that the parties would have agreed to include the clause if they had
negotiated the issue. The Plaintiff has provided no such evidence. Therefore, Defendants'
motion for summary judgment on the Plaintiffs breach of the duty of good faith and fair dealing
claim is granted.
Counts I and V
The Court finds that the Defendants have failed to show the absence of a disputed
material fact in relation to Count V and therefore denies the Defendants' Motion for Summary
Judgment as it relates to that Count. The parties' briefing in relation to Count I was cursory,
and circumstances have now changed. The Court would therefore find it helpful to have further
letter briefing, and requests that each party file a supplemental letter of no more than five pages,
limited to the question of summary judgment (or dismissal) in relation to Count I.
For the reasons above, the Court will GRANT IN PART and DENY IN PART the
Defendants' Motion for Summary Judgment (D.1. 579). An appropriate order will be entered.
The Superior Court came to a similar conclusion regarding a similar argument in Price v. State Farm Mutual Auto.
Ins. Co., 2013 WL 1213292 at *14 (Super. Ct. Mar. 15, 2013).
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